Monday, May 05, 2008

Democratic Presidential Candidate Hillary Clinton’s stand on the “gas tax holiday” does not reflect well on her presidency at all. An article on CNN, Obama camp out with new gas tax ad, Clinton camp fires back tells of the specifics of this dispute, and it shows Clinton willing to promote harmful fictions in her pursuit of power.

The proposal on the table is to suspend the Federal gasoline tax for the summer in order to keep gasoline prices down and to save the American gasoline buyer some pain at the pump when they fill their vehicle.

Now, we have two options. Either the supply of gasoline is elastic (responds well to differences to price), or it is not. There is, of course, a range of options in between. However, if both of these end points are bad, then any place in the middle is equally bad.

Let us assume that the supply of gasoline is not elastic. If this is the case, then a lower price will result in increased demand. When demand increases for a scarce product, prices go up. This is precisely why gasoline prices are going up now – because demand has increased and supply has not kept up. This strongly suggests that we are in a period of maximum capacity. We may assume that the current price of gasoline reflects the point at which demand matches supply. (Rising prices suggests that we are actually at a point where demand exceeds supply.) So, the market response to a reduction in the gasoline tax would be to raise prices to the point that demand again matches available supply.

The result will be no gain to the consumer. The gain, instead, will go to the oil companies, who will be able to pocket money that now goes to the government.

That’s one end of the spectrum.

The other end of the spectrum is that the supply of gasoline is elastic and will respond to price. This means that the market will not respond to tax holiday by raising prices but, instead, will raise its supply output to match the existing demand. Setting aside the fact that if the gasoline industry was in a position to do this then prices would not be rising today, this suggests that Clinton’s solution to the problem of gas prices is increased gasoline consumption. Fossil fuel use is a leading contributor to greenhouse gasses. Clinton, then, is advocating that the government spend billions of dollars to promote the burning of fossil fuels, to the detriment of future generations.

But, future generations do not vote and cannot vote against Clinton. In order to secure the Presidential nomination, it seems, Clinton is more than happy to do harm to those who do not have a vote (future generations) in order to buy the support of those who do vote (current generations).

Any place between these two end points (determine by the degree to which gasoline supplies can be increased to match increased demand) is simply a trade off between ‘profits for oil companies’ (to the degree that gas supplies cannot go up any further) and ‘promoting greenhouse gas emissions’ (to the degree that gas supplies can be increased to meet the increased demand).

Now, either the Clinton camp is aware these facts, or they are not. Neither option flatters the Clinton campaign.

If they are not aware of these facts, then Clinton has surrounded herself with a bunch of ignorant fools – and we do not need ignorant fools running White House policy for another four years.

The other option is that the Clinton campaign team has taken a poll that has told them that a gas tax holiday proposal is a vote getter. In spite of the fact that they know that the plan will do no good – that it will actually do more harm than good – most people do not have a sufficiently in-depth understanding of economics to see through to the likely outcomes. They think that this proposal will save them money, and they are all for saving money. Rather than educate us on the economic facts of the matter so that we can better promote our values, they seek to perpetuate and actively promote our ignorance – by telling us that these fictions are true. In their quest to win the election, they do not care about the harm that uneducated people will do to themselves by following policies they know will do more harm than good.

From a political campaign perspective, the choice is simple. It takes a lot of energy to educate the public. It would take a lot of effort to go out and teach the people the economic facts that say, “If you go along with this proposal, either you will be handing your money to the oil companies or doing greater harm to future generations. You will probably just be handing your money to the oil companies.” It takes much less effort to say, “You’re absolutely right. If we suspend the federal gasoline tax for the summer all of that money that the government otherwise collects in taxes will end up in your bank account with no adverse consequences.”

To be fair, I need to mention that the Clinton Administration seeks to combine this gasoline tax holiday with a windfall profits tax on oil companies in order to compensate the government for losses in revenue. Where are the oil companies going to get this money? Well, they’ll get it by raising the price of gasoline to cover the additional cost – by an amount approximately equal to the reduction in taxes. So, people still pay the gasoline tax to the federal government. Only, the tax goes through the oil companies on the way to the government.

Assuming that the ‘windfall profits tax’ on oil companies matches the lost revenue from the gasoline tax. The result is no net effect on the people buying gasoline. They will pay just as much at the pump, and the money will be divided up as it is now, only the method of dividing up the money has changed. The change is one that gives the people the false impression that something was done (that consumers are getting relief and the evil oil companies are being punished) when, in fact, nothing had changed.

This, in itself, is problematic in light of the assertion coming from the Clinton campaign that:

"That’s a critical distinction in this race between, in Senator Clinton, someone who understands the pain that middle class and working class families are feeling…and Senator Obama, somebody who just doesn’t seem to understand that middle class families are hurting, working class families are hurting and that they need relief," Clinton Communications Director Howard Wolfson said.

The misinformation campaign extends not only to telling the people falsehoods about the effectiveness of their own plan, but maligning somebody who is telling the people the truth. It is one thing to be dishonest to the people. It is another when that dishonesty extends to telling people that they should distrust somebody who is being honest with them (on this issue).

It causes one to wonder if a Hillary Clinton administration would act like the Bush administration in sending out the attack dogs to malign the character of anybody with a voice who dares to tell the people the truth about administration policies.

To be fair, of the three principle candidates for the Presidency, Republican nominee John McCain’s position is by far the worst. McCain has no wind-fall profits tax that will replenish government revenue. Instead (assuming that gasoline prices are inelastic) McCain’s proposal will have the simple effect of reducing government revenues by several billion while increasing oil company profits by a like amount. It causes one to wonder how much the energy company lobbyists are ‘investing’ in lobbying the Republican Party for a gas tax holiday for the consumer.

This, then, highlights another problem with Clinton’s mis-education campaign. Lying to the people on the effects of the gasoline holiday, she would then have to get a bill through congress. This bill would then be subject to political compromise. Republican obstructionists could threaten to hold up the bill until certain concessions are made – concessions that would mean the federal government getting less money (and being forced to endure the risks of a national infrastructure that would be left unrepaired as a result of this policy. At the same time, the oil company executives (and lobbyists) will be the sole beneficiaries and oil company stockholders getting more.

Through her decision to promote myth for the sake of political expediency, she takes away the people's ability to protect themselves from demagogues such as John McCain - somebody obviously willing to exploit a myth in order to transfer more money into the pockets of oil company executives. She gives him cover by supporting, rather than challenging, the fiction on which McCain's policy was built.

This is just one policy in this election. However, this policy does give us a suggestion as to the moral character of the camps - of what they want to accomplish and how they are willing to accomplish it. Character is important. Character tells us something about how a candidate will treat us in the future.

No comments:

About Me

When I was in high school, I decided that I wanted to leave the world better off than it would have been if I had not existed. This started a quest, through 12 years of college and on to today, to try to discover what a "better" world consists of. I have written a book describing that journey that you can find on my website. In this blog, I will keep track of the issues I have confronted since then.